Production Cycle

Pre-Production 

(funded by production company)

• Producer/studio acquires rights to film story or treatment OR an independent production company chooses a production company/distributor - Hollywood has the advantage as it has more money to spend securing the rights to films. 
• Screenplay is developed - Hollywood has advantage as it employees more writers and can afford the best 'talent.'
• Production finance and cast/crew are confirmed, locations are confirmed, scheduling takes place, call sheets are created, costume fittings happen, equipment is organised - Hollywood has the advantage as it can afford to spend more on big name stars, directors (even great British directors like Hitchcock get lured to Hollywood), experienced crew, locations, costumes and equipment. 

Production

(funded by production company)

• Principle photography takes place, in studios and/or on agreed locations (on average this takes 3 months) - Hollywood has the advantage as vertical integration means access to studios, equipment etc. Also, they can afford to spend longer on shoots. 

Post-Production

(first two stages funded by production company, the other stages are funded by the distribution company)

• Editing and scoring takes place, test screenings take place that the producer feels are necessary after getting feedback from the primary target audience (could even include re-shooting some scenes). Hollywood have the advantage because they can spend more of employees, editing equipment/technology and music rights.   
• Master print of finished film delivered to distributor - USA distributors have the advantage because they can afford to produce more prints for blanket release. 
• Distributor determines national and international release strategies and date (where/when/how in each country - also decide on premieres, film festivals etc.)
• Distributor presents film to exhibitors and negotiates bilateral agreements to have film shown in cinemas
• Distributor's marketing campaign creates 'hype' amongst target audience and launches film (marketing takes many forms, big Hollywood conglomerates have the advantage because they can use synergy across range of media platforms)
• Prints are delivered to cinema a few days before opening - Hollywood films have the advantage because multiplex cinemas are loyal to Hollywood films for profit reasons. 
•  Film's run extends any number of weeks subject to demand  
• Marketing of home media begins after the film has left cinemas - Hollywood companies have the advantage as they have more to spend on marketing.  

• Film is released on DVD, Blue-ray and becomes available to download. Home media sales is often where British films make the most profit - they can compete on a more level playing field at this stage as the production costs of DVDs etc is less than reels.

Low budget films do not attract as many viewers as big budget films. The majority of films that do well at the box office have massive production and distribution budgets, as this list of the all time highest grossing films demonstrates:

Viewers want to see famous A list celebrities in state of the art films and a big production budget is necessary to get the rights, starts, crew and technology. Also, advertising is vital to a films success and a big budget is necessary to get this right as well. Hollywood are not stupid, they have a pretty good idea what films are worth investing in. Through looking at the list I posted earlier of the most expensive films of all times you can see that most of these films grossed a profit. However, occasionally mistakes are made and big budget films flop at the box office making massive losses such as; Cutthroat Island (net loss of £92.7 million), The Alamo (net loss of £92 million) and The Adventures of Pluto Nash (net loss of £91.8 million). http://www.guardian.co.uk/film/gallery/2012/mar/20/biggest-box-office-flops-in-pictures

The Blair Witch Project is an exception, as it was filmed in just eight days and had a budget of $600,000, but grossed over $248.3 million. The post production was much more important and took eight months and mainly included groundbreaking viral marketing and online buzz. http://www.businesspundit.com/10-most-profitable-low-budget-movies-of-all-time/9/